Is commission income Retirement Funding Employment Income?
09 June 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: In the case of pure commission earners, is commission income classified
as Retirement Funding Employment Income if the employer has no pension fund and
the employee only contributes towards a retirement fund and not a pension fund?
earners are not affiliated with a pension fund, neither do their employers
provide for them to belong to a pension fund.
Should their income
not then be seen as Non-Retirement Funding Employed income per the 1 March 2016
definition commencement of ""retirement-funding employment” in section 1
of the Income Tax Act?
A: The relevant parts of the definition of
‘retirement-funding employment’ is that it means: "in relation to any employee
or the holder of an office (including a member of a body of persons whether or
not established by or in terms of any law), who—
i) in the case
of such employee, derives in respect of his employment any income constituting
remuneration as defined … and is a member of or, as an employee, contributes to
a pension fund or provident fund established for the benefit of employees of
the employer from whom such income is derived…”
The fact that the
person receives remuneration (and commission is remuneration) is not sufficient
to make it ‘retirement-funding employment’ – the recipient must also be a
member who contributes to a fund established for the benefit of employees of
the employer from whom such income is derived.
We accept that the
fact that you say "the employer does not contribute towards a pension fund for
their employees” indicates that the fund was not established for the benefit of
employees of the employer.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.